(2023) How is employment income in foreign currency converted?

If you receive your wages in a foreign currency, you must convert the income into euros for the income tax return. If taxes were withheld abroad, you must also convert these into euros for crediting against the tax liability. The Federal Fiscal Court has clarified how this should be done (BFH ruling of 3.12.2009, BStBl. 2010 II p. 698).

• The conversion is carried out according to the cash basis principle in accordance with § 11 para. 1 EStG at the time of receipt. In the case of wages, this is when the salary is credited to the bank account.

• The conversion of income must be done using the euro reference rate of the European Central Bank, specifically the monthly average rates. These euro reference rates correspond to the VAT conversion rates set monthly by the Federal Ministry of Finance and published in the Federal Tax Gazette I.

The tax authorities do not apply these BFH requirements to cross-border commuters to Switzerland. Instead, they should enter both their wages and the Swiss withholding tax in Swiss francs in their tax return in the "Form N-Gre". The tax offices then convert these amounts on an annual basis - not monthly! - into euros. They use an average annual amount specified by the tax authorities. For 2021, the tax authorities specified the annual conversion rate for the tax assessment as 92.00 EUR for 100 CHF.

For the 2022 tax assessment, the tax authorities announced the conversion rate as 99.00 EUR for 100 CHF. In 2021 it was 92.00 EUR, in 2020 it was 93 EUR (finanzamt-bw.fv-bwl.de). The rate for 2023 was not known at the editorial deadline.